Nothing spooks the markets like the oil price. The fear of running out, the threat of terrorism, panic over US house prices, all of these are built into that most volatile of sums: the price of a barrel. Now, after years of fretting over rising prices, traders and economists are finding reasons to shiver over its fall, and what it tells us about the global economy.
So last week, instead of worrying about confrontation between the US and Iran -- concern that helped drive oil to a US$78 August peak -- the fears were of a nasty US slowdown, thanks in part to a crumpling housing market, that will undercut demand for crude. The price fell to US$60, a six-month low.
Is that fall here to stay, and is it really a harbinger of economic doom? It depends whether what has happened in recent weeks is driven more by real changes or by the feverish speculation of traders.
Recent economic data offer some support for the fears. In the first quarter, US GDP grew by 5 percent year on year, falling to 3 percent in the next. In August US house prices fell for the first time in a decade. Morgan Stanley sees a 23 percent chance of a recession next year.
"There are plenty of traders in the market who believe that the US will grow by only 1.5 percent next year," said Paul Horsnell, oil analyst at Barclays Capital.
In a note last week he went further, saying that this is the "modal expectation" across the market, as is a hard landing in China, whose voracious economy has supported commodity prices in recent years.
Short positions have multiplied, indicating that the market expects short-term falls. But are the bears right?
Horsnell thinks not. He points to his own bank's forecasts for US growth next year of some 3 percent (the IMF has 2.9 percent, down from 3.4 percent this year), and global economic growth of 4.7 percent -- admittedly down from this year's 5.1 percent, but not, he said, "a path that could be described as a hard landing."
Economists elsewhere point out that the oil price will have its own effect on the US economy in particular.
Kevin Gaynor of RBS says that with oil making up 8 percent to 10 percent of consumption, a fall in the price of 15 percent would add up to 1.5 percent on consumption. He believes that US growth will be about 3 percent next year, and consequently said he is "not bearish" about the oil price.
Concerns about economic demand, however, are not the only cause of the recent price fall.
"The reason it has come down is not market fundamentals, it is the easing of geopolitical tensions in Iran, Lebanon and elsewhere," said Fatih Birol, chief economist at the International Energy Agency in Paris.
Here, analysts are not convinced that there will be a lasting effect.
"This is a key reason why people have expected high prices in the past. But there is no reason to think there has been substantial change. The media go from one day to another looking at Lebanon and Iran; they also look at Venezuela and Russia, where some companies have been having problems with Sakhalin. I do not think there has been a major change in the geopolitical situation, and I would be surprised if prices this year or next go much below US$50 a barrel," Birol said.
But they could if there were a dramatic change in the balance of supply and demand. The key players here are the OPEC nations, chiefly Saudi Arabia. While non-OPEC countries produce some 62 percent of the world's oil, investment in regions such as the Gulf of Mexico and Siberia is only maintaining production at current levels.